Archive for category economic trends
“As ASHRAE President Gordon V.R. Holness noted in the ASHRAE Journal, “Approximately 86% of building construction expenditures relate to renovation of existing buildings, not to new construction.” Holness estimated that “over the next 30 years about 150 billion sf of existing buildings (roughly half of the entire building stock in the United States) will need to be renovated.” Historically, new construction only adds about 2% annually to the U.S. commercial building stock, so the real opportunities for reducing operating costs must be found in building retrofit and renovation.” – Glumac Blog.
Buildings are the major source of global demand for energy and materials that produce by-product greenhouse gases (GHG). Slowing the growth rate of GHG emissions and then reversing it is the key to addressing climate change and keeping global average temperature below 2°C above pre-industrial levels.
To accomplish this, Architecture 2030 issued The 2030 Challenge asking the global architecture and building community to adopt the following targets:
- All new buildings, developments and major renovations shall be designed to meet a fossil fuel, GHG-emitting, energy consumption performance standard of 60% below the regional (or country) average/median for that building type.
- At a minimum, an equal amount of existing building area shall be renovated annually to meet a fossil fuel, GHG-emitting, energy consumption performance standard of 60% of the regional (or country) average for that building type.
- The fossil fuel reduction standard for all new buildings and major renovations shall be increased to:
- 70% in 2015
- 80% in 2020
- 90% in 2025
- Carbon-neutral in 2030 (using no fossil fuel GHG emitting energy to operate).
These targets may be accomplished by implementing innovative sustainable design strategies, generating on-site renewable power and/or purchasing (20% maximum) renewable energy.
Please visit Frequently Asked Questions section for more in-depth information on the 2030 Challenge.
*Note: This was stated in the January 2008 Edition of the ASHRAE Journal. When we polled permitting for Boston, we found 75% for construction in Existing Buildings. 25% New.
I read this awhile ago, but thought it important enough to post and probably repeat everyday. Everyone has dealt with 90+, 120+, 180+ day receivables and if anything that kills a project, kills morale, and passes on costs to others more than being held up for payment I’d like to hear it, but busting your hump on a project and paying your team, your insurance, etc, and delivering a project, service, goods on time and then having to wait forever? Who decided this was good business except some CFO or accountant who noticed his operational or investment portion of the balance sheet firmed up when they held everyone out for days on end and helped his/her margins? So with sanity in mind let me post and repeat:
Governor Signs Construction Prompt Payment Legislation Into Law
Governor Deval Patrick signed into law new legislation prescribing language on pay applications, payment flow, change orders and suspension of work for non-payment on August 10. The bill, filed by Associated Subcontractors (ASM) and supported by the trade unions passed the House on July 8 and passed the Senate on July 31, the last day of the legislative session.
You can see the press release on the AGC web site… hooray for sanity.
So while one can point out the data rich building modeling was born in Europe through Archicad’s debut in 1987, the term BIM was coined in the US and popularized by Autodesk, and now BIM adoption is lagging on the continent. This, at first blush, seems improbable. Graphisoft born in Hungary, Tekla born in Finland, Solibri born in Finland. Herring must help analytics. However consider this from McGraw Hills Smart Market BIM Report on Europe.
- Just over a third (36%) of the Western European industry participants reported having adopted BIM, compared to the 49% adoption rate in North America in 2009
- Over a third of Western European BIM users (34%) have over 5 years of experience using BIM versus only 18% in North America
- Three-quarters of Western European BIM users (74%) report a positive perceived return on their overall investment in BIM, versus 63% of BIM users in North America
- Contrary to North America , where BIM adoption has surged among contractors to 50%, BIM has only been embraced by 24% of of Western European Contractors.
Those using it in Europe appear to be doing it better. This most likely is short lived as the nitrous was put in the US BIM engine back when the GSA required it on projects and states started following suit as did Universities, etc. This would explain the more experience in Europe as well as the reported ROI figures.
BIM in the US is currently madness. It went from an after thought on the shelf to;
‘Give me a cup of coffee and I’ll take a BIM with that.”
” What do you need it for?”
” I don’t know just everybody is telling me I need one.”
Anyone in the business will tell you they have experience with clients that had no idea about Revit or Archicad, etc. but will include it as part of the scope on a project. These hiccups are expected so there is still a lot of education to go on within the industry. BIM is a big tent and it has many flavors so people are using it successfully in a variety of ways. It was surprising to me that GCs in Europe lagged their US counterparts in adoption, which shows that either integration is not happening as one would hope with BIM and IPD (Integrated Project Delivery) or a smaller number of contractors are getting the business in Europe.
While we might thank the US Government for mandating BIM, or for that matter whatever lobbyist and well funded junket put the BIM bug in the US ear, BIM acceleration is happening, so is the ROI and the knowledge on how to use it.
I have suggested among others that the optimum work flow could be architects focus on the design, not construction docs or the BIM, but the design and then consult during the actual engineering and BIM process, that way it minimizes redundant efforts especially in regards to BIM creation. This process also would suggest the rise of design/build firms. AECOM just took a huge bite out of that apple when terms were disclosed yesterday that they agreed to acquire Tishman for $245 Million Dollars creating a design/build behemoth. Strategically, vertical integration is a double edged sword. Positively, you have control of costs and quality and capture every last dime a developer was intending to put into the project. Negatively, you have to feed the beast and can you really be that good at all disciplines?
On a side note, I was speaking to an integration specialist at Bentley who told me AECOM was a Microstation shop. This may be because back in the day the US Government was using a lot of Microstation and AECOM gets the majority of their work from the public sector. Tishman, and I am only speculating here, was most likely Revit. Skidmore, Owings & Merrill LLP (SOM) used Revit at World Trade and Tishman was on as construction. Quick google search shows they still seem to use it on current projects. Future projects and technology they use could be a proxy for the industry.
So earlier in these ruminations I stated that I thought 30% less was the new watermark, that is, 30% less work out there, 30% off what used to be a winning bid. Early market data from Jon Peddie Research, shows a 22% drop in 2009 CAD revenues as compared to 2010. This is just on the software side, not services, which we can argue would be worse. Subscriptions are down because why renew an empty seat as are new sales. This report deals with CAD on all levels from designing parts to designing buildings but still gives a good overview of the industry. The good news for those embracing BIM is that they reaffirm other anecdotal information that BIM is a bottom up phenomena not a mandate from management. That is, the people building the buildings are the ones who are using not because of perceived value or marketing spin but because it adds value. Hammer..check…Compressor…check…BIM model…
Updated Aug 2010
I noticed a lot of traffic to this page, and also noticed that the link to the report required a log in so decided to quote it here.
Let’s just get this over with: the year 2009 was a disaster in the CAD industry. According to our latest report, the CAD industry saw revenues of $5.1 billion, a 22% drop compared to 2008 and although the picture is improving for 2010, there is no rebound because that’s just not the way the CAD industry works, and worse, that’s not how this recession worked.
The CAD industry cannot turn on a dime because it’s part of larger systems. At this year’s Autodesk University, Carl Bass noted that subscriptions were down because there’s not much reason to maintain a subscription for empty seats. Unfortunately, there are a lot of empty seats for all CAD systems worldwide. We estimate that approximately 200,000 workers left the CAD industry worldwide. And, it can be added, we believe this is a conservative view.
In this latest report we have seen an interesting trend as Building Information Modeling (BIM) becomes accepted in the engineering, architecture and construction (AEC) industry. The similar discipline, PLM is just about ubiquitous in MCAD but as it was being introduced into the MCAD industry in the early 90s, it was essentially implemented in a top-down process as management signed up for the advantages that come with a consistent and connected data pipeline. In contrast, BIM in the architectural fields is being driven by those at the end of the pipeline in building and construction.
30%, that’s the figure that keeps coming back to me, business is down 30% and competitive bids are 30% less than what they used to be. I even had firms we do business with in India essentially say, “I am not going down the rathole.” You have got to be creative to deal with it. It reminds of a an accounting professor in business school who extolled, “all costs are variable,” not really but you get the point. Renegotiate rents, bargain with your workforce, create partnerships to fill holes, man it stretches the imagination which is good, however there is no reality like payroll, and rent, and insurance, etc. There was a recent article in the Las Vegas Business Press, “From Boom to Bust,” that echoes these themes. One GC stated that, ‘Our revenue in 2010 will be slightly less than half of what it was in 2008.” Bidders on projects have multiplied by 3, and successful bids seemed to be 40% below 2008 highs.
“Cash flow is the king during a recession,” Perini Building Co. Vice Chairman Dick Rizzo said. “As the economy shrinks, prompt payment is important. In some cases, it’s the only source of income to subcontractors and vendors.” This statement brings me to my next point, when did we ever, and architecture firms I am looking at you, get to a point where this statement is the norm, ‘you get paid when we get paid.’ Holy $$$$. This is patently ridiculous. There was a good article in the Boston Business Journal that said free lancers and sub contractors are spending as much time tracking down payments and getting paid as they did on the actual project. So looking at that vice of lower winning bids and taking forever to get paid what’s a small business to do? You can whine about it, not much help, or try and figure it out. I don’t even say make lemonade from lemons, this is strictly survive than thrive. To the ‘you get paid when we get paid’ again who ever agreed to that, but if your on the short end of that scenario consider starting a relationship with a factor, otherwise known a receivable financing, different companies specialize for different industries and even by size of receivables but there is one out there for you. They will take 1-3 points monthly but nothing like cash flow. As for some of the advice you get such as put penalties in your contract, talk directly to payroll, etc. most them will stay with the partly line, and a lot replace contracts you may have put together with their own which certainly does not have any late payment penalties.
As for multiple bidders and reduced winning bids, know your costs, use BIM, be ready for hard bids. It’s telling that GCs are the early adopters to BIM, Revit and the like and embracing their 4D and 5D aspects.
Partner up, can you still offer the same level or service as you could in 2008? Can you offer more today? More companies may be more willing to work together. Like I tell my kids, ‘the answer is always no unless you ask.’
BIM continues to cross pollinate industries. According to American Laundry News (I’ll read it so you don’t have to) UniMac a manufacturer of on premise laundry equipment is now providing BIM objects of their most popular models. This, of course, allows the AEC community to incorporate them with their designs from a spatial sense and also coordinate utilities for hook up. Ideally warranty and manual information is tagged to the object as well so one object becomes a one stop shop of information, maintenance logs, etc. The bigger idea is what’s your BIM strategy? As the internet opened up a world of information about, well, everything BIM is opening up a new world of information.
I equate this next step in the internet and technology from going to the big bang, ‘wooaha new universe’ to galaxies to planets and these are starting get populated with more information and relevant data. The AEC industry is starting to break down from macro trends, etc. the complete life cycle of a building and how each decision effects it. There is a world of information and opportunity within this world. For example, UniMac just made it easier for a designer to spec their machines. What company wants the contract to keep the data and maintenance logs up to date for those machines within this BIM world, who wants the actual maintenance contract and which companies are plugged into take advantage of that entire life cycle, not just the building but almost every object in it.
Within the last week I have been called, e-mailed and gone out to discuss sustainable retrofits. The logic for it seems unassailable and I included some quick stats at the bottom of the posting. However, as with the rise of virtual construction this is starting to make more sense to most that this is a real economic opportunity. What’s the cause, not sure if it’s the natural progression as companies look for opportunities in this environment, a truck load of AARA and TARP funds have hit, the Clinton Climate Initiative is creating traction, or a lot of hemp wearing hippies have hit the boardroom, however I believe the first penguins have slid down the ice and the rest of the waddle / rookery / herd is starting to follow.
Additionally, more hard data points are becoming available to assist. The Empire State Building has started a massive $500 million renovation and hopes to reduce its energy cost up to 38% annually or $4.4 Million. ‘Wait, you say’ Even I know what looks like to be a 100 year payback seems insane, why spend the money.’ If you look more closely and as they point out at the website that additional improvements on already planned upgrades cost $13.2 million, so $13.2 million yields the saving and payback in less than 4 years. The Chicago Mercantile Mart and its 4.2 million SF of showrooms, offices and and tradeshow space earned LEED -EB (Existing Building) Silver. While a video of Kong climbing the Empire State could be more compelling I included the promotional video as possibly more informing.
Inside the video at about 2:05 they talk about energy modeling. I wish they included what they used to model it, but if we start talking about scenario analysis and ROI we start talking about BIM again, and various companion products like EcoTect and IES. One of the bigger points made is that the time to do these things is by piggybacking on top of already planned improvements. But from low flush toilets, to new digital controls, reglazing windows, to chiller retrofits new ROI models are inviting and this strategy/offering has to be, absolutely, be in your quiver.
Some data points I found while researching this post.
Excerpted comments from President Obama speaking at the Brookings Institute are as follows:
Speaking about AARA funds the President said “is put Americans back to work doing the work America needs done, doubling our capacity in renewable energy’
‘Clean energy projects will all be ramping up in the months ahead’
‘I’m calling on Congress to consider a new program to provide incentives for consumers who retrofit their homes to become more energy efficient, which we know creates jobs, saves money for families, and reduces the pollution that threatens our environment. And I’m proposing that we expand select Recovery Act initiatives to promote energy efficiency and clean energy jobs which have proven particularly popular and effective.’ Full Transcript Available Here
Buildings and Climate Change – Quick Stats:
- Buildings Account for 38% of CO2 emissions in the United States —more than either the transportation or industrial sectors
- Over the next 25 years, CO2 emissions from buildings are projected to grow faster than any other sector, with emissions from commercial buildings projected to grow the fastest—1.8% a year through 2030
- Buildings consume 70% of the electricity load in the U.S.
- Buildings have a lifespan of 50-100 years during which they continually consume energy and produce CO2 emissions. If half of new commercial buildings were built to use 50% less energy, it would save over 6 million metric tons of CO2 annually for the life of the buildings—the equivalent of taking more than 1 million cars off the road every year
- The U.S. population and economy are projected to grow significantly over the coming decades, increasing the need for new buildings – to meet this demand, approximately 15 million new buildings are projected to be constructed by 2015
- Building green is one of the best strategies for meeting the challenge of climate change because the technology to make substantial reductions in energy and CO2 emissions already exists. The average LEED® certified building uses 32% less electricity and saves 350 metric tons of CO2 emissions annually
- Modest investments in energy-saving and other climate-friendly technologies can yield buildings and communities that are environmentally responsible, profitable and healthier places to live and work, and that contribute to reducing CO2 emissions
Source: USGBC (US Green Building Council) and ASHRAE ( American Society of Heating, Refrigerating and Air Conditioning Engineers), the AIA, IESNA (Illuminating Engineering Society of North America) and the DOE.
So for fun I was reading this article on Synchronous Lateral Excitation, okay I am kidding I wasn’t doing it for fun but the author used the opening of the millennium bridge to make a point that that people created a synchronous feedback loop, think walking in lock step, that made the bridge start to sway uncomfortably, the bridge was then closed for 2 years as the figured out and solved the problem. The author, Josh Cassidy, then went on to use this analogy for the capital markets and how it makes them crash prone. Like a continuous self reinforcing feedback loop that makes them inherently more stable, as one bank stops lending, individually sounds prudent, as a group they shut down the credit markets, companies sell assets to raise money, one company selling assets to raise money, okay, everyone doing it floods the market with assets, whether stocks, bonds, etc and the value of these assets then decline, and get on for another round.
I then read something about Google, remember they do no evil, see #6 but their argument for mining as much personal data from you as humanly possible, even if it is done under the cloak on anonymity, is to give you results that are tailored to you. That is when you search for cars, they might serve you not just generic information about cars, but they certainly will give you adwords based on cars, and maybe they even tailor it to Volvo because they new you were searching about Sweden earlier in the day, or maybe because of your web wake the found you to be ‘like minded’ with another sub-group that not only liked Volvos but were liberal democrats, or made the assumption because of the visits to Green Peace web site, and because of that when you searched for things began to serve your choices based on earlier predilections and habits, which to me is no different than synchronous lateral acceleration, that is if someone groups you with others that are like minded and that’s the info you get, this self reinforcing feedback loops only serves to bolster whatever view point you came in with. (sidebar: I think the argument that it is anonymous is specious at best because although they do not, supposedly you are Bob living in Topeka, they know exactly who you are on the internet, I’m not arguing good or bad here just the anonymity angle).
So getting back to the ‘box’ in the titile. What getting out of the box to me means is take in other view points, speak to other people go to a tradeshow, presentation, meeting, forum, etc. that has people not in your industry, just to see what people are doing, problems they are facing, solutions they are using, and you start getting a better perspective, interesting how this whole crowd sourcing thing is taking off, which could be viewed as a way to compress this type of interaction. But getting out of the box does not mean show up to work in clown clothes but rather how can we think differently about a problem, how do we bring a new perspective, and just getting out and talking to people in different venues starts to help, or e-mail, blogs, forums, and it gets too easy to stay in your comfort zone, and I’m guilty myself. Next time getting on the plan pick up a magazine or paper you’ve never read before any maybe never had any intention of reading again, see what you get out of it. Maybe you won’t get anything out of it, or maybe you’ll just see a cool ad for a volvo.
As for being in the box and ride it, how do we pick up on this momentum or recognize this momentum shift, internet bubble, real estate bubble, and we all know there will be another bubble, and what are you going to do about it. It shouldn’t be, ‘I’ve seen this before and I’m not playing’ it should be how best to take advantage of this without being standing when the music stops, or not even that, it’s how can I play and not be stupid to buy into it. Like during the internet bubble when I saw an interview with a young guy who owned the domain, and I think it was pantyhose.com, and for the millionth time I hear someone say, you know how big the pantyhose market is, I am going to be the Amazon of pantyhose, I think I knew right there that the music stopped. Hopefully we can all be bright enough to do both.
I thought I’d share some numbers here since I find it difficult to find them openly out there on the interweb. I included a Market Share Pie Chart which appears to be from Gartner Research circa 2007. Using the 55% AutoCAD figure for the total market share and using the AutoCAD installed base via 2008 of 4,162,000, which is right from an Autodesk Press release, we then can approximate the total installed seats for CAD (2D, 3D, BIM) to be around 7,567,273. However, this figure could be derived by revenue which will distort the total installed seats figure.
If we assume that 7,567,723 figure is correct, as well as the 7% figure for Revit provided by Gartner we get installed seats of Revit to be 530,000, give or take. That seems kind of close to the back of the envelope estimates I was coming up with by getting published accounts of installed Revit seats to be around 400,000 end of 2008, and they were selling new seats of Revit at around 20,000 per quarter, would have them around 480,000+ by the end of this year 2009. If installed seats of Revit have not surpassed the installed seats of AutoCAD Architecture, previously Architectural Desktop, it has to be getting close, as of 2008 there was an installed base of ADT/ACA of 503,000.
Using the report as a guideline they had BIM growth at approximately 12%, if Revit is adding seats at approximately 20,000 per quarter that is a 15% gain from FY 2009. In 2008 they had an increase in revenue from Revit from the previous year of 23%, which could be attributed to sales of subscriptions and on going maintenance contracts above and beyond the 15% I came up with here.
Another interesting fact is that as a percentage of revenue 3D Products and AutoCAD itself were getting very close to parity, with AutoCAD and AutoCADLT at 32% and 3D Products at 30%. I am not privy to how they break out all the figures but Civil 3D, Navisworks and Revit are all thrown into that bucket. So 3D solutions has gone from 23% of FY 2008 revenue to 27% of FY 2009 revenue to 30% at the Q2 FY 2010 watermark.
Some other information I found in an article at Architosh, and I have posted some of it here.
Revenue and Growth
According to JPR’s research, CAD software vendors saw combined revenues of $5.2 billion (USD) in 2007 globally. The CAD software market grew by an astounding 20% in 2007 compared to 2006. Despite a very poor US economy and the threat of US recession, the CAD industry will continue its positive economic trend and will grow to over $6 billion (USD) in 2008. Looking out five years the global CAD software market will reach and exceed $8.2 billion (USD).
2D and 3D
In 2007 the worldwide installed base of CAD users reached 5.31 million. In 2007 the majority of CAD users (63%) are still working in 2D, while 37% work in 3D. However, revenues for 3D CAD surpassed 2D CAD taking 53% of the market. This trend will continue but JPR makes note that not all 2D CAD users will make a transition to 3D CAD.
The article was based on the research from Jon Peddie Research.
To look at the 2007 figure of installed seats as reported by Jon Peddie, of 5.3 Million and a 15% Growth Rate we would get approximately 6.09 Million Users in 2008 and 7.00 Million in 2009.
Hope this was helpful for those of you at their searching for this stuff, and if you weren’t I don’t know how you got here and why you’re still reading.